Saks Incorporated Announces Results for the Second Quarter and Six Months Ended August 4, 2007

Business Wire, August 21, 2007

Comparable Store Sales Growth of 13.2%, Gross Margin Rate Expansion, and Expense Leverage Drive Improved Operating Performance for the Quarter

NEW YORK -- Retailer Saks Incorporated (NYSE: SKS) ("Saks" or the "Company") today announced results for the second quarter and six months ended August 4, 2007.

The Company sold its Saks Department Store Group ("SDSG") businesses in 2005 and 2006, and the sold SDSG businesses are presented as "discontinued operations" in the prior year period. Saks Fifth Avenue ("SFA") and Club Libby Lu are reflected in the Company's continuing operations.

Overview of Second Quarter Results

Saks Incorporated recorded a net loss of $24.6 million, or $.17 per share, for the second quarter ended August 4, 2007.

The second quarter included the following after-tax items totaling $4.3 million, or $.03 per share:

* expenses of approximately $2.0 million for retention, severance, and transition costs related to the Company's downsizing and consolidation following the disposition of its SDSG businesses,

* $2.0 million related to asset impairments and dispositions, and

* a loss on extinguishment of debt totaling $0.2 million related to the repurchase of $10.4 million of senior notes.

For the prior year second quarter ended July 29, 2006, the Company recorded a loss from continuing operations of $53.1 million, or $.39 per share. After recognition of the Company's after-tax gain from discontinued operations of $1.2 million, or $.01 per share, the net loss totaled $51.9 million, or $.38 per share, for the prior year second quarter. The prior year second quarter included the following after-tax items totaling $18.1 million, or $.13 per share:

* a $12.8 million non-cash charge related to the treatment under Financial Accounting Standard 123r ("FAS 123r") of the anti-dilution adjustment made to outstanding options related to the Company's $4 per share dividend paid in May 2006,

* expenses of approximately $3.7 million for retention, severance, and transition costs,

* expenses of approximately $0.8 million associated with the previously disclosed ongoing investigations by the Securities and Exchange Commission and the Office of the United States Attorney for the Southern District of New York, and

* $0.8 million related to asset impairments and dispositions.

Overview of Results for the Six Months

Saks Incorporated recorded a net loss of $13.6 million, or $.10 per share, for the six months ended August 4, 2007.

The six months included the following after-tax items totaling $22.2 million, or $.16 per share:

* expenses of approximately $15.6 million for retention, severance, and transition costs,

* a loss on extinguishment of debt totaling $3.4 million related to the repurchase of $106.3 million of senior notes,

* $2.2 million related to asset impairments and dispositions, and

* expenses of approximately $1.0 million associated with the ongoing investigations.

For the prior year six months ended July 29, 2006, the Company recorded a loss from continuing operations of $41.4 million, or $.31 per share. After recognition of the Company's after-tax gain from discontinued operations of $67.5 million, or $.50 per share, net income totaled $26.0 million, or $.19 per share, for the prior year six months. The prior year six months included the following after-tax items netting $23.1 million, or $.17 per share:

* a $12.8 million non-cash charge related to FAS 123r,

* expenses of approximately $7.6 million for retention, severance, and transition costs,

* $3.4 million primarily related to asset impairments and dispositions,

* expenses of approximately $1.8 million associated with the ongoing investigations, and

* income of approximately $2.5 million due to the favorable conclusion of certain tax examinations.

Comments on the Quarter

Stephen Sadove, Chairman and Chief Executive Officer of the Company, noted, "We are pleased with the significant improvement in our operating performance for the second quarter which primarily was driven by strong comparable store sales growth, substantial gross margin rate expansion, and meaningful expense leverage.

"Our second quarter comparable store sales increase of 13.2% indicates that our customers are responding to our focused merchandise assortments as well as our customer service and marketing initiatives. We expanded our gross margin rate by 270 basis points for the quarter primarily as a result of reduced markdowns."

Sadove commented, "Nearly all merchandise categories performed well in the quarter, especially men's apparel, accessories, and shoes; women's contemporary and designer sportswear; women's shoes; and handbags. We generated solid performance across all geographies and store sizes. Our New York City flagship location once again posted very strong sales in spite of extensive construction underway on the eighth floor as we remodeled to accommodate our expanded shoe department, which just opened. The number of transactions and the average dollars per transaction rose during the quarter.

"As we add new vendors and improve the functionality of our e-commerce site, the growth of Saks Direct continues to outpace the Company average. The Direct business generated an approximate 40% sales increase over last year's second quarter. Off 5th was another bright spot as we continue to refine the merchandise assortments with more direct purchases from core vendors and to introduce additional private brand product to the outlet stores."